Protectionism

PROTECTIONISM. - Protectionism is part of that artificial system of expedients and maneuvers that constitutes economic policy.

I. PROTECTIONISM AND FREE TRADE

1. Antagonism

The antagonism between free traders and protectionists reproduces the age-old one between theory and practice: or rather, between incomplete and imperfect theories and disorderly empiricisms. More precisely, the antagonism is between pure economics and practical economics: the latter being reduced, in the absence of a true and proper applied economic science, to business practice and the economic policy of governments. Since pure or theoretical economics has so far failed to provide rational solutions to the problems of reality, free traders are pointlessly scandalized in the face of the charge that international exchanges do not ensure equal and reciprocal advantages to the two contracting parties, and indeed inevitably harm one of the parties, allowing the undue enrichment of the other. They thus perpetuate the illusion of the first economists, who believed that a new science of associated life could, in its applications, disregard the deep-rooted customs of an economic process already centuries old, and the differing conditions of development of nations, which still manifest themselves in the imbalance of prices in general, and of the prices of labor in particular.

This imbalance, in order not to incur the dangers of protectionism, must be remedied by economic means: by substituting for the barbaric preconception of necessary struggle, and for the confused episodes of that struggle, the sure, clarifying and orderly step of science, and a beneficial division of international labor in an atmosphere of peaceful agreements and free exchanges, governed by self-interest (v.).

2. From protectionism to planning

While, however, free trade represents a natural and logical state of economic life, and therefore has a scientific value at least as a hypothesis and as an ideal tendency, protectionism is part of that artificial system of expedients and maneuvers that constitutes economic policy: a system of privileges and stimulants which, because of the retaliations and reprisals it provokes, soon proves insufficient and must be intensified, ruining, like all stimulants, the material and moral health of individuals and of society.

Protectionism arose from the necessity of protecting the rise, the preservation and the prosperous development of national industries, agriculture and also commerce from the competition of similar foreign industries, agricultures and commerce. It is a corrective to the lower prices of foreign goods and labor compared with national ones, which is implemented mainly by bringing those prices to the level of, or above, national ones, through the payment of customs duties on imports.

Other expedients of economic policy, within the framework of the same purpose, are export bounties, import licensing regimes, quotas and compensations, prohibitions on the introduction of certain goods or on immigration, as well as currency measures of various kinds: to these are added provisions of an exclusively domestic character, such as the control of new industrial plants, the manipulation of manufacturing taxes, of subsidies, tax facilities and exemptions, direct or indirect state financing, which complete the picture of what is modernly called "controlled economy," or "dirigisme," or "third way." All this is fatally destined to lead to a planned economy (v. PIANIFICAZIONE); and finally to a state economy, nationalist or communist.

Like all unnatural regulations, protectionism can serve excellently for a specific, limited purpose, and for a not very long time: if, however, it rises to the status of an ordinary system of economic policy, and is applied on a vast scale, it rapidly loses effectiveness, both because of the habit that producers acquire toward it, and to which they will no longer be able to renounce, and because of the reactions and retaliations of the nations affected by the system. At this point protectionism begins to cause serious and growing damage to the very country that adopts it, because of the situations of privilege it creates in favor of groups and categories, especially the least deserving, and because of the general harm to all consumers, forced to endure a continuous increase in prices: finally, because of the growing difficulty of trade that follows from the tariff war thus provoked. Hence protectionism, once applied in one country, rapidly spreads to other countries, becomes entrenched and must be intensified: its reduction becomes increasingly difficult, and its elimination almost impossible. The continuous drafting of commercial treaties and new tariffs, the projected customs unions and the like, do not signify certain and decisive steps on the road to the dismantling of customs barriers and toward the hoped-for free mobility of goods, men and capital: it is necessary to act on the economic causes of the system, and not on its practical manifestations.

II. HISTORICAL NOTES

Historically, protectionism finds its origins in the mercantile system of Colbert in France and of Cromwell in England in the 17th century: but as an idea and a purpose of commercial hegemony it has existed since the most remote times. In its present forms, protectionism began with the constitution of the confederation of the United States of North America: which, given the occasional motive for its formation, was born protectionist, even while implementing among the constituent States the most convinced and enthusiastic freedom of trade. The "economists" of the end of the 17th century condemned protectionism with the celebration of free trade (laissez faire, laissez passer): and with its victory in the struggle begun in 1858 in England by the Manchester school, particularly by Cobden, against the duty on grain (Corn laws), concluded in 1846 under the Peel ministry. In 1872 the France of Thiers attempted protectionism to recover from the defeat, but without succeeding: instead the Germany of Bismarck fully succeeded in 1879, in order to solidly establish the industrial and military power of the German Empire. From then on, one after another, with more or less veiled or radical forms, all States went about girding themselves with customs barriers: incited to do so, besides by commercial reasons and by the necessary defense of industries useful for war, by the demands both of the first workers' movements with a socialist background, and of the first great trusts in various branches of the fundamental industries, true economic and political powers within the individual States.

This was the cause of the rapid degeneration of a system that was nevertheless of some use in certain circumstances; but that instead ended up poisoning with jealousies, envies and a spirit of retaliation the international life for over half a century, preparing numerous wars and finally the outbreak of the two great world conflagrations.

Mario Baronci